Pound Rebounds Amid US Trade Deal Optimism

The pound increased in value following a new limited trade agreement between the UK and U.S., announced by President Trump and Prime Minister Starmer. The deal preserves some tariffs but expands agriculture access. Although the economic impact is minimal, the agreement fosters optimism for future trade talks.

The pound rose on Friday as a result of a 'breakthrough' trade agreement between the UK and the United States, announced the previous day.

U.S. President Donald Trump and British Prime Minister Keir Starmer revealed a limited bilateral trade deal, maintaining Trump's 10% tariffs on British exports, slightly increasing agricultural access for both nations, and reducing steep U.S. duties on British car exports. While not comprehensive, analysts said it suggests other trade agreements with the Trump administration could be achievable, boosting investor confidence.

This U.S. deal has positively impacted Britain's forthcoming trade discussions with the European Union, remarked ING strategist Francesco Pesole. He acknowledged that while its direct economic effects are limited, signing two consecutive trade deals in quick succession has buoyed market sentiment. Sterling, meanwhile, saw a slight increase against the dollar after the Bank of England reduced interest rates to 4.25%, amid varied opinions from the rate-setting committee on the necessity of the cut.

(With inputs from agencies.)